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Caymanas slots
Gaming machines would help the cash-strapped company compete, says Matalon
By Julian Richardson Assistant Business Co-ordinator richardsonj@jamaicaobserver.com
MATALON... says slot machines are more attractive option than horse racing (PHOTO: KARL MCLARTY)
Slot machines at the race track would put cash-strapped Caymanas Track Limited (CTL) in a better position to compete for gambling dollars in an increasingly competitive gaming industry, says Joseph A Matalon.
Matalon, the chairman of the state-owned horseracing company that is set for divestment, based his argument on the fact that the payout in horseracing is far less than that of slot machines inside gaming lounges, which have swarmed the Jamaican market in recent years.
"We pay out 68 per cent of our purse to the punter, the normal payout for gambling is over 80 per cent, so that gives you an idea that (slot machines) is a much more attractive option than horseracing," said Matalon, adding that "shenanigans and hooliganism" at the track has also made horseracing "less predictable".
The introduction of a slot machine shop at the track would make Caymanas more competitive while attracting a wider market, said Matalon during a presentation to the Rotary Club of St Andrew North on Monday.
He said such a move would be in line with similar actions by a number of international horseracing companies such as the Florida-based racing and casino parks, Gulfstream and Calder. Gulfstream has over 850 slot machines while Calder has a 29-table card room located in the grandstand.
"What makes it profitable at those race tracks is the gambling (at casinos)," Matalon said.
However, given the expected divestment of CTL, Matalon said the current board could not commit to such a move.
"We don't feel, at this point in time, that this current board should make that long term committment today, when in twelve months time we expect to divest the race track," said Matalon.
"We should allow for the new owners of the race track to make that committment to their best advantage," he said.
A local consortium led by former Carreras boss Michael Bernard, interested in purchasing CTL, has reportedly promoted the idea of turning Caymanas Park into an entertainment centre, with slot machines and bingo at the track. The group of investors, the Racing Divestment Committee, are the only publicly known interest — though Matalon said there have been "rumours" that there are Chinese and South African interests as well.
In December last year, the Cabinet approved an enterprise team appointed by the Government to handle the divestment of CTL, with the head of the Sagicor Group, Richard Byles, as chairman. However, Byles eventually turned down the appointment after a conflict of interest developed, and was last week replaced by Jamaica Money Market Brokers boss, Keith Duncan.
Matalon has painted a dire financial situation at Caymanas, which for financial year ending 2012 posted operating losses of $149 million and debts amounting to $920 million, of which $600 million represented taxes owing to the Government. CTL for several months owed stakeholders $53 million in purses to stakeholders, of which $22 million was finally paid last week and the company proposes to pay the remainder in tranches payable in April and May.
The CTL chairman blamed a combination of mismanagement and a decline in gambling support due to competition for the decline in CTL's performance since the 2007 financial year, when the company reported operating profits of $29.3 million and total assets exceeded total liabilities by $235 million.
To avoid closure of the track, the CTL board has undertaken cost-saving initiatives, which have already cut expenses by $72 million, but some are deferred maintenance and are not sustainable, Matalon said.
Matalon said CTL heavily subsidises trainers and owners at the park. All barns are provided free of cost, including electricity to the stables; CTL provides daily maintenance to the track during training, an excercise pool for the horses, and collects all the manure and stable waste. What's more, every horse that participates in a race receives a $5,000 appearance fee, purses are paid from first to sixth place, and a nine per cent payment of the purse is made to the breeder of a locally bred horse for winning a race.
Against that background, proposals have been made for further cuts expected to yield $70 million savings on cost of sales, he said. This includes suspending the breeder's bonus — a payment made to the breeder of a locally bred horse for winning a race — of nine per cent; reduced the purses on regular races by 4.8 per cent after the removal of breeder's bonus; feature races with purses over $3 million will be reduced by 30 per cent and a fee of $20 per day will be payable as a contribution to the maintenance of the barns.
"The present financial structure which offers a gross profit of 8.1 per cent is inadequate to cover operating expenses and will result in continued losses. As a result, the stakeholders have been asked to take a cut in the purses and to observer the Caymanas Stable Rules," Matalon said.
Additionally, the board has employed a new staff, including a CEO, financial controller, marketing manager and internal auditor to bring back viability to the business. Caymanas has targeted increased revenues through more competitive races and rental of the facilities for non-racing events, and is in discussions with overseas suppliers simulcast racing to increase the number of tracks it offers as well as to start exporting its own signal overseas
